Creditors Acquire 95% of Share Capital in Íslandsbanki

• Glitnir, on behalf of creditors, acquires 95% of Íslandsbanki's share capital
• Glitnir will appoint 4 directors of 5 on the bank's Board of Directors, the fifth will be appointed by the Icelandic government
• This conclusion will strengthen Íslandsbanki and reinforce its co-operation with foreign financial institutions
• As the government´s 's contribution will be much lower than originally estimated, this will reduce Treasury debt

Reykjavík, 15 October 2009. Glitnir's Resolution Committee has, on behalf of its creditors, decided to exercise the option provided for in its agreement with the Icelandic state and take over 95% of share capital in Íslandsbanki. The outcome is based on thorough due diligence carried out by Glitnir's advisors on Íslandsbanki's operations.

This concludes the settlement concerning those assets transferred from Glitnir to Íslandsbanki upon the collapse of the commercial banks last October. According to the agreement on settlement between Glitnir's Resolution Committee and the Icelandic government, signed on 13 September this year, the government will, furthermore, provide the bank with an ISK 25 billion subordinated loan to strengthen its equity and liquidity position.

The agreement represents a very significant step forward in the future reconstruction of the Icelandic financial system. The participation of creditors will facilitate the bank's co-operation with foreign financial institutions. This outcome will also mean that the cost to the Government of refinancing the bank will be ISK 37 billion lower.

The Resolution Committee's decision is subject to the approval of the Icelandic Financial Supervisory Authority (FME) and the Icelandic Competition Authority. Glitnir's Resolution Committee will control the bank's holding on behalf of its creditors through a special holding company. Glitnir will appoint 4 directors of 5 on the bank's Board of Directors, with the fifth appointed by the Icelandic government.

According to the agreement between Glitnir's Resolution Committee and the government of 13 September this year, Glitnir's creditors were offered two options. One option was to acquire a 95% holding in Íslandsbanki, while the other was to accept payment in the form of debt instruments issued by Íslandsbanki, plus call options on as much as 90% of the bank's shares over the next five years.

Following detailed examination it is the assessment of Glitnir's Resolution Committee that accepting a 95% holding in Íslandsbanki will return maximum value to creditors. This assessment is based, on the one hand, on the opinion of the advisors who have assisted Glitnir, which include experts from UBS investment bank and the law firm Morrison & Foerster.

Árni Tómasson, chairman of Glitnir's Resolution Committee:
“The Resolution Committee has made an extensive assessment of the two options available to creditors. It is the unanimous opinion of the Committee and its advisors that acquiring a 95% holding in Íslandsbanki is the better option, as there is a good probability that this route can return greater value to creditors,” says Árni Tómasson.

Minister of Finance, Steingrímur J. Sigfússon:
“This decision by Glitnir, in consultation with creditors, to acquire an Icelandic bank is definitely gratifying. It is a clear sign that in the assessment of foreign investors an end is in sight to the international financial recession we have been struggling with in recent years. The final steps are now being taken in the reconstruction of the Icelandic banking system which will be fully prepared to service individuals and households, while promoting the recovery of business and industry.

It is important that the cost to the Treasury will be substantially lower than would otherwise have been the case, although in my estimation state ownership of Íslandsbanki would also have been a satisfactory option for the Treasury and the general public. The Treasury will provide the bank with equity and, in addition, with liquidity support if required. This therefore places the bank in an extremely solid financial position and its customers can entrust Íslandsbanki with their assets with full confidence.”

Birna Einarsdóttir, CEO of Íslandsbanki:
“We welcome this outcome, which I consider to be a declaration of confidence in Íslandsbanki, since creditors' advisors have carried out very thorough due diligence on the bank's operations. This will have a positive impact on our activities and is an important milestone in building a new bank. I would like to point out that it will not affect Íslandsbanki's everyday activities. We will continue our efforts to lead the way in providing solutions for our customers. For Íslandsbanki, and all of our employees who have made an untiring contribution to this effort, this is a day to be remembered.”

Final Information Memorandum - 14 October 2009